Circus and Clowns

When I was a kid, circus was a big deal. When there were not many options for entertainment; wild animals, clowns and acrobats which were the core events in a circus became a source of thrill and excitement. I was told by my late parents that an event in a circus changed my life. I was a heavy consumer of milk as a baby and refused to let go the bottles even when I grew older (can't remember the exact age). However, when I saw a bear sucking milk from a bottle I decided to not do the same anymore!

I have not been to a circus for many many years. I am not sure whether there is one nowadays as most of us now watch circus on television. However, if we were reflect the way we live our lives, we could start to see that some of us are behaving as if they are the star attraction in a circus.

A circus will not be one without clowns. While they wear fancy and colourful dresses, these people are professionals and were able to deal with wild animals, involve in acrobatic acts while at the same time make the crowd happy and smiling. Being on the centre stage, the clowns will be involved in funny acts and making fun of themselves with the sole purpose of entertaining the audience.

In the real world we may have professionals choosing to act like clowns, whether they realise that or not. If we define clowning as engaging in funny actions, then we could start to see many clown, perhaps in suits, walking down our streets. Why am I saying this?

Clowns in business suits?

A professional uses his or her specialist knowledge and skills to serve the society and to act in the best interest of the society. As a trade off, professionals are given privileges by the society and the access to their fields are restricted to recognised professionals only. Professionals must externalise values which make them honourable in the eyes of the society they serve. 

So, when professionals start to forget about this principle and argue that public interest is not their business, we could deduce that they are akin to behaving in funny actions, not that far from those of clowns. What more when they do this in front of big audience, albeit among their own kind in a confined space. Such situation is dangerously close to be similar to an old time circus that we used to know. 

This is where the difference between a professional clown and a professional acting like a clown could be seen. While the former are normally entertaining, the entertainment value of the later may be very minimum but many may want to cry to observe their behaviours. To make the situation worse,  the accidental clowns do not charge any fee, their performance is free for the world to watch. Not sure whether such cheap show actually reflect the class (or the absence of any class) of this clowning professionals. 

I suppose we need to be careful in whatever that we do, not withstanding we are professionals or not. Remember, if we do funny things in public, we could turn out to be clowns and the world would be laughing at us without us realising.

Wanted: True and Frank View

By Errol Oh

NEXT month, Kuala Lumpur will be the venue for the last of three roundtables organised by the International Auditing and Assurance Standards Board (IAASB) to gather feedback on the board's proposals to improve the auditors' report on financial statements.

Considering that the first two legs were held earlier this month in New York and Brussels, it's quite an honour for KL to host the final one. And the topic of discussion is significant.

“The auditor's report is the auditor's primary means of communication with an entity's stakeholders,” Prof Arnold Schilder wrote in the chairman's statement of a document issued in June by the IAASB, an independent standard-setting body.

“It is generally a short, standardised report that describes the financial statements subject to audit, the audit itself, and the respective responsibilities of management and the auditor. A cornerstone of the auditor's report is the auditor's opinion, which is either a clean' (unmodified) or modified opinion with an explanation of the basis for such.”

(In Malaysia, those responsible for a company audit are usually referred to in the plural form of auditors', and the report is accordingly called the auditors' report'.)

Titled Improving the Auditor's Report, the IAASB document is an Invitation to Comment (ITC) that encourages stakeholders to respond to the board's suggestions on how the report can be changed so as to be more relevant, informative and useful.

The suggested improvements set out in the ITC include:

Having “Auditor Commentary” in the auditors' report. This is additional information to highlight matters that the auditors believe are likely to be most important to users' understanding of the financial statements or the audit. The plan is to make such information a requirement for public interest entities (PIEs). In the Malaysian context, PIEs include listed companies, banking and financial, insurance companies and takaful operators, and holders of Capital Market Services Licences (such as securities and futures trading firms, and fund management companies).

Auditor conclusion on the appropriateness of management's use of the going concern assumption in preparing the financial statements and an explicit statement as to whether material uncertainties in relation to going concern have been identified.

Auditor statement as to whether any material inconsistencies between the audited financial statements and other information have been identified based on the auditor's reading of other information, and specific identification of the information considered by the auditor.

Prominent placement of the auditor's opinion and other entity-specific information in the auditor's report If these become part of the international auditing standards, users of accounts will know more about the audit work done and the thoughts of the auditors.

Currently, a “clean” audit opinion in Malaysia is typically no more than a single sentence, albeit a long one, that offers the auditors' opinion that the financial statements “have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965, in Malaysia so as to give a true and fair view” of the company's financial position and performance, and cash flows.

Such a succinct and flat statement is a disproportionate product of an audit. The audit opinion is supposed to be the result of a lot of time, effort and judgement, and yet it's merely a simple thumbs up.

Schilder, the IAASB chairman, says it best in the ITC: “More than ever before, however, users of audited financial statements are calling for more pertinent information for their decision-making in today's global business environment with increasingly complex financial reporting requirements.

“The global financial crisis also has spurred users, in particular institutional investors and financial analysts, to want to know more about individual audits and to gain further insights into the audited entity and its financial statements. And while the auditor's opinion is valued, many perceive that the auditor's report could be more informative. Change, therefore, is essential.”

The IAASB's suggested improvements certainly represent a step in the right direction. Hopefully, the stakeholders will embrace these changes and will provide wise input to sharpen them further.

But let's bear in mind that it's easy for the auditors to fall into the habit of issuing boilerplate statements, even when the standards have been enhanced. If that happens, we will end up back to square one.

No matter how much the auditing standards are tweaked and polished, we will always have to rely on the integrity and professionalism of the auditors.

It's hard to reach that level of trust on some days, when corporate failures erupt without warning.

We'll probably feel a lot better if the auditors' reports also show utter candour. Wouldn't it be great if the reports contain lines like these?

“Haven't you heard the old argument that auditors are watchdogs, not bloodhounds? Don't depend on us to sniff out fraud with a once-a-year visit. If the management is smart and determined enough, we'll never detect its wrongdoing in the course of a normal audit.”

“We've been auditing this company for many years and we know well the guys running the show. If we've never found anything wrong all this while and the management hasn't changed, why would we be suspicious?”

“Let's get real here. The board of directors are only willing to pay us X amount of audit fees. Sure, we can expand the scope of the audit work, but who'll pay for the extra man hours required to perform the additional work?”

“Hey, the audit market is very competitive. Companies have been known to switch auditors after their accounts had been slapped with modified audit opinions or after disputes over accounting treatment. “

“Spare a thought for us auditors. Costs are rising and employee retention is getting more challenging. The accounting rules and business conditions are increasingly complex. On top of that, the regulators are more watchful. And you expect us to keep doing better and better?”

Executive editor Errol Oh wonders if the discussions during the IAASB's KL roundtable will be noticeably different from those in New York and Brussels.

An Accountant Known For His Fast Cars

In many cases, accountants are associated with boringness. Try to have conversation with them and a non-accountant will be bombarded with jargons such as IFRS, fair value and many other terms that can bore him to death. I am not sure how true this perception is.

However, as many of us would acknowledge, there is always exception to the general rule.

Motivated to be an accountant when a fast red Ferrari driven by another accountant (Azman Hashim) passed him, he went to the UK to pursue accountancy instead of medicine. From then onwards, the rest was history. Datuk Ali Kadir, went on to be an illustrious accountant, regulator, corporate player, race car driver and philanthropist.

Among his past achievements were being the Senior Partner of Ernst & Young, Chairman of the Securities Commission and President of the Malaysian Institute of Certified Public Accountants (MICPA). During his chairmanship, the Securities Commission launched the Capital Market Masterplan in 2001, which was the foundation of the development of the Malaysian capital market for the next 10 years. Off course not to mention his collection of fast cars which he could afford later in his life!

Recognising his contributions to the accounting profession and the society, Datuk Ali Kadir was awarded with the President's Award at the 54th MICPA annual dinner. Acknowledging his parents and colleagues who has contributed in shaping his to who he is today, the award is definitely another feather on a cap of this amazing accountant who dared to take the challenge and is another towering Malaysia who had contributed significantly in nation building.

I suppose Datuk Ali is just continuing the legacy of his family tradition in public service. His father, Tan Sri Abdul Kadir Yusuf was the Attorney General and Law Minister and his mother, Tun Fatimah Hashim was one of the group that was involved in seeking independence from British. She then became the Welfare Minister, when her husband was also in the Cabinet.

Tan Sri Abdul Kadir Yusuf 

Tun Fatimah Hashim

Being honoured on the eve of Malaysia Day speaks well of this family who had contributed to make Malaysia what she is today.

Congratulations to Datuk Ali.

Why Crack Our Brains?

Solving problems is never easy. If we remember our schooling or university days, I am sure we could recall the anxiety we felt when faced with toughs questions in completing our course work or during examinations.

At least at school or universities, we were provided with facts and the chances are we could spot the problems to be solved quite easily, I hope. In the real world, our first challenge is to be clear of whether there is any problem in the first place and what are those problems before proceeding to resolve them. This is more challenging when things appear to be nice and beautiful, as portrayed on TV and other mass media. What is the problem and why we should be worried when others are singing and partying?

Inadvertently there would be groups of people who will argue that we should not be worried unnecessarily and should not crack our brains to solve non-existence problems. They may also point us to other directions, albeit minor and not relevant and try to impress upon us that those are real issues waiting to explode. Why not join the crowd, sing and dance and your problems will go away, suggest these 'enlightened' people.

Given the power of media nowadays, it would be fairly easy to create the sense of celebration among the mass, despite impending problems. However, many of us choose to party rather than taking those problems seriously because partying is fun but solving problems is though and difficult and may require us to forego things that we have.

Time and again I cannot help but to remind my friends about the frog which was cooked slowly and died while enjoying the warming water. Some may argue that this is a myth but the message is you could die from what you perceive to be good for you.

As the society, environment and circumstances around us will continue to change, we cannot help but to continue looking for danger signs around us and respond accordingly. This requires our brain to continuously working. Some people don't like to think and reflect, especially when they were brought up to trust those who portray themselves as 'leaders'.  From small this simple minded people we conditioned to believe what is shown on TV or published in newspapers.

Again, the choice is ours.

Talent Retention and Attraction in Larger Accounting Firms

Talent is now a major issue in most organisations. While the population is ever growing, finding the right talents for specific functions appears to be a challenge. Beyond that, organisations are also finding it difficult in retaining those talents. 


The survey, Talent Attraction and Retention in Larger Accounting Firms of audit staff is one of the most in-depth ever undertaken in Singapore. Commissioned by the Accounting and Corporate Regulatory Authority of Singapore and conducted by the ACCA, nearly 1,200 audit staff were asked what gives them job satisfaction and what will make them stay or go. The report also proposes follow up actions for audit firms.

You can download the full report here

Apathy

One issue that was raised by Royal Professor Engku Aziz during a luncheon talk that I attended was apathy as a root cause for the challenges faced by the Malays in Malaysia. Although he did not elaborate much about this and promised that he will write a paper on the issue, Pak Engku did elude to the historical facts that the Malays once were great explorers for 400-500 years before they ended being what they are today. I suppose we have to wait for the paper promised by Pak Engku to understand more of his perspective of Malays and apathy.

What is apathy?

Wikipedia describes apathy as is a state of indifference, or the suppression of emotions such as concern, excitement, motivation and passion. The Dewan Bahasa and Pustaka describes apathy as absence of interest, enthusiasm or in Malay, sikap /acuh tak acuh, endah tak endah, apati; not far off from the earlier description either.

It would be interesting to wait the analysis of Pak Engku how a race which once were recognised explorers suddenly when into collective indifference and lost their enthusiasm. Being explorers suggests that they were once excited to find new grounds and experience and not scared of the unknown but indifference on the other hand suggests that they could not be bothered with the happenings around them. What did happen?

If the Wikipedia is analysed, the positive traits such as motivation and passion are no longer part of the Malay culture because they are suppressed. The question here is why and by whom? It is important to understand the reasons behind this as we are celebrating our 55th Merdeka. If 55 years of independence fails to remove the factors which suppresses the Malay mindset, we better know the reasons so that we could remove the suppressors. Otherwise we may ended up with more of the same even when the Wawasan 2020 is achieved.

I do not wish to speculate and will patiently wait for the next instalment from Pak Engku. Waiting is depressing and it may cause me to fall into apathy as well. Pak Engku, please publish your article soonest possible.